Blogonomics: Monetizing readers

grossly misrepresent my views, so it's worth explaining in a bit more detail what I actually think about blog content and how it can and should be turned into money.
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At this point, even I’m bored of the Salmon vs Blodget wars. But Henry has decided to grossly misrepresent my views, so it’s worth explaining in a bit more detail what I actually think about blog content and how it can and should be turned into money.

One of the first rules of blogging is to link a lot, especially if you’re writing about someone who has made their views freely available on the internet. For instance, my post on Wednesday about Blodget firing John Carney has seven external links, three of which are to Business Insider; my post on Friday about Business Insider’s economics had eight external links and one internal link, with six of the external links going either to Blodget’s site or his Twitter feed.

If you look at Henry’s post about me, however, it includes the word “Felix” five times, but he doesn’t link to me — or to anybody else — at all. Instead, he larded his post up with lots and lots of internal links. It’s easy to get from Henry’s post to somewhere else on his site; it’s impossible to get from his post to anywhere else on the internet, unless it’s someone who’s paying him for the privilege of advertising on TBI.

This is important, because Henry talks about how I “seem to feel” and about how “Felix’s criticism of our content is grossly unfair”. It’s simply wrong to blog such things without linking to the criticism in question and allowing your readers to make their own minds up about whether you’re characterizing it accurately — especially when Henry doesn’t even bother to quote me directly in his piece.

Now because Henry doesn’t quote me or link to me directly, it’s not clear exactly what he’s talking about. But the one thing that’s pretty clear is that he thinks that I think that TBI is failing to produce “long, text-heavy analysis, original reporting, and commentary”. Well, for the record, I don’t think that. But his tweetifesto does make it pretty clear that he judges such content in exactly the same way as he judges a dashed-off blog entry illustrated with a picture of two hot babes kissing: by how many pageviews it generates.

If you’re going to judge all stories using that particular yardstick, then it’s pretty obvious that you’re going to end up with lots of cheap posts with provocative headlines and/or photographs, and lots of slideshows which can generate dozens of pageviews per reader per post. And you’re going to end up firing people who are better at more thoughtful, longer-form content.

TBI’s lead developer, Ian White, left a comment on Henry’s post saying that TBI has published 2,547 stories in March to date — all with an editorial staff of 15, plus three interns. Ignoring weekends for the sake of simplicity, that works out at 8.5 posts per person per day. It’s the more-is-more sweatshop model: never mind the quality, feel the quantity. If you throw enough stuff up there, something’s bound to be a hit. And if you spend too much time and effort on any one post, the opportunity cost of doing so is large: you could be generating more pageviews by writing more, shorter pieces, or — better — putting together a slideshow instead.

This is a model which works until it doesn’t. It’s undoubtedly true that the more posts you put up, the more pageviews you get, and when you’re selling ads on a CPM basis, every extra pageview means extra revenue. It’s also true that if an airline charges a passenger $25 for checking a bag, that’s $25 of revenue it wouldn’t have had otherwise. But charging money for checking bags can result in lower revenues overall, and chasing pageviews can do likewise.

The fact is that while chasing pageviews like this worked well in the early days of the blogosphere, when Nick Denton asked his editors for at least 12 posts per day, it’s much less sustainable today — and the Gawker post quotient has been reduced to 6 abolished*, with layers of editors on top of the writers who bring the average number of posts per editorial employee per day lower still. Today, if you want to compete on who can produce the most SEO-honed content per day, you’re going to lose, and people like Demand Media are going to win.

Henry is proud of the fact that his RPMs (revenues per thousand pageviews) are much higher than RPMs at more generalist sites. But in an era of essentially unlimited inventory, creating vast amounts of new inventory in order to increase CPM-based revenues is not an obvious road to riches — I’ve called it “a junk-mail paradigm which benefits no one”, and no, that’s not just the view of a naive editorial-side person without business-side experience: it’s also the view of Jim Spanfeller. If your pageviews become less valuable, falling RPMs can mean lower revenues even on higher traffic.

Blodget should remind himself on a daily basis that publishers make money by selling readers, not adspace, and that if he’s going to make money, he’s going to have to do so by getting high-value readers that companies want to reach. At the moment, both Blodget and his advertisers are stuck in an increasingly out-of-date paradigm wherein pageviews serve as a proxy for readers, but today, unless you’re Demand Media or the like, that paradigm is doomed.

The job of the editorial side at TBI, then, should not be to maximize pageviews. Instead, it should be to create the best-quality content for the readers that Blodget wants: to build a large and loyal readership base which feels that it has a strong relationship with the site. Once the editorial side has built that readership, then it’s the job of the business side to monetize it. Yes, banner ads are one way of doing that — but they’re only one way of doing that, and they shouldn’t be allowed to determine the editorial mix to the detriment of editorial quality more generally.

How else can an online business monetize its readership? AllThingsD makes lots of money from its conferences. And conferences don’t need to be huge events sold months in advance, either: smaller salons can also be very profitable, especially if they come pre-seeded with name-brand TBI talent like Carney and Blodget. The Daily Telegraph, in the UK, is a large retailer in its own right. As real-money prediction markets become legal in the US, there’s surely going to be a lot of money in writing about them and driving rich readers to them. If you have content which is so great that other people want to run it, you can make money syndicating it, or give them the option to embed it on their own site in a way that benefits you both. You can copy Wall Street research shops, which while nominally selling research reports are really selling access to the people writing them. That kind of business model benefits everybody: the kind of person willing to spend money to have phone access to a TBI reporter is probably exactly the kind of person that the TBI reporter wants to talk to in any case. And if you get a good amount of penetration within a certain financial community, there are some pretty interesting ways to make money by putting your readers in touch with each other. Finally, it’s almost impossible to underestimate the value and profits that can be found in a good email product, in a world where financial executives spend much more time on their BlackBerries than they do surfing the web.

If I was a venture capitalist backing TBI, I wouldn’t be asking Blodget for his pageview numbers: instead, I’d care much more about other metrics of reader quality, reader engagement, and reader loyalty. That’s where the big long-term money lies, since high-value readers are hard to find, and will always be worth a lot. If TBI puts too much effort into chasing CPM revenues, it’s likely to find itself firing exactly the employees who were doing the best job at building the reader relationships it most needs.

Now TBI is not, actually, bad at serving readers and building up a high-quality audience. I liked their experiment with embeddable content, I like their full RSS feeds, I especially like the way that they’re now including the full content of slideshows in their RSS feeds, and I think they do a very good job on the aggregation/curation front, finding and linking to the best financial news and commentary from around the web. They also know that they need high-quality original content of their own, and they have historically been good at supplying that, too. If their aim is to pick a set of readers and then give those readers everything they could want or need in terms of original content and external links, then up until now they’ve been doing a pretty good job — although, as I say, Blodget has always been a bit parsimonious on the external-link front when he’s writing his own blog entries.

But some things work against readers: reading a blog entry in a web browser shouldn’t turn into a game of Frogger where you have to make sure not to mouse over any word which has been underlined twice, for fear that it will open up an intrusive pop-up video ad. And when you’re lucky enough to have hired a name-brand journalist who is admired by your readership, who understands the medium, and who gives you desperately-needed credibility, don’t fire that journalist just because his paycheck is more than one-third of the direct CPM revenue he brings in. It’s absurd to assume that your own overhead should be somehow apportioned between journalists on the basis of how much they’re earning, and in fact it’s even more absurd to think of journalists as profit centers in the first place. Journalists are cost centers: you spend money on them in order to attract a high-quality readership. If a journalist does that but you’re having difficulty monetizing that readership, then don’t blame the journalist, and don’t try to get him to chase pageviews instead.

Traffic can be bought. Loyal reader relationships need to be earned, and that’s where stars like Carney are invaluable.

*Update: Nick Denton emails to say that Gawker now has no post quotient at all, and that his writers are now judged only by the new visitors that their pieces bring in, rather than the number of pageviews they generate. And Blodget responds — on the version of this post he excerpted on TBI, natch. In what I’m pretty sure is his first comment about Carney since he fired him, Henry says “he’s a good writer and a great guy, and we’ll miss him“.